The primary purpose of this blog (Prithviraj Kothari - MD, RSBL | Bullion market blog) is to educate the masses of the current happenings in the Bullion world.
This blog contains my opinion, which is not to be construed as investment advices.
Information provided in these blogs is intended solely for informative purposes and is obtained from sources believed to be reliable

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Saturday, 21 April 2012

GOLD BEHAVING MORE LIKE A RISKY ASSET THAN A SAHE HAVEN ASSET

Gold edged up on Wednesday after a successful Spanish debt auction eased fears about the euro zone debt crisis, but gains were capped as the euro remained under pressure ahead of a longer-term debt sale in Madrid later this week.

Gold was again little changed again in European trading on Friday morning, unable to find a strong direction and instead likely to replicate the recent volatile but rangebound trading pattern ahead of the weekend.

Spot gold stood at $1,640.90/1,641.70 per ounce, down just 70 cents. It fell to its lowest since April 5 at $1,631.10. The metal has recently traded in volatile fashion in a tight band, unnerving investors - prices lost nearly one percent to a one-week low of $1,634.70 in the previous session after reaching its best in 10 days above $1,680 last week.

Gold and silver continued to zigzag in recent days; even though both metals didn’t perform well during most of the month (so far). Their fall wasn’t sharp and they could change direction if there will be another speculative movement in anticipation for next week’s FOMC meeting.

Gold may have been undermined by news that the International Monetary Fund (IMF) raised its global economic forecast to 3.5 percent this year from its previous forecast in January of 3.3-percent growth.

The euro zone is still expected to shrink this year but at a slower pace of 0.3 percent than the previously forecast 0.5 percent. Meanwhile, developing economies such as China will grow even more this year, expanding at 5.7 percent versus its previous forecast of 5.5 percent. The US should grow 1.4 percent this year.

In addition, this morning's short-term bill debt auction in Spain went smoothly, with the country raising more money than anticipated at 3.2 billion euros.

This saw gold's safe-haven appeal fade, with investors looking to riskier assets such as equities, which rose today

On the physical side, an unexpected lowering of interest rates in India could lend some support to demand, which has been notably weak since its government introduced some changes to the import duty tax in March. This was despite the start of the spring wedding season and ahead of the auspicious Akshaya Tritiya festival that falls on 24th April. After Dhanteras,. The highest sale of gold is witnessed on Akshaya Tritiya.

Over in India, traditionally the world’s largest source of gold bullion demand, jewelers are reporting a 50% drop in sales ahead of next week’s Akshaya Tritiya festival – seen as an auspicious day in the Hindu calendar to buy gold.

According to a recent report, Perth Mint, which processes all of Australia’s bullion, decreased by 9.6% during March. This news might have been due to Jewelers strike in India during or a decline in demand for gold investments.

Either ways, if this trend continues, it may adversely affect gold’s performance in near future.

Gold has traded in volatile fashion in a tight band over the past two weeks, unnerving investors who have mostly preferred not to hold onto their positions. But short-selling has alternated rapidly with waves of safe-haven demand while macroeconomic conditions remain worrying.